LONDON — A whistleblower report claimed that Tesco accountants were “falsifying documents” to avoid the attention of auditors and cover up a £250 million hole in Tesco’s accounts in 2014, a court heard on Thursday.
Three former Tesco executives are standing trial for fraud relating to a “black hole” of nearly £250 million in the retailer’s profits, which was first reported in September 2014. All three deny guilt.
Amit Soni, a senior member of Tesco’s finance team who allegedly acted as a whistleblower in the case, gave evidence on the fifth day of the trial at Southwark Crown Court in London on Thursday.
The court heard that a document commissioned by Soni and written secretly by a member of his team outlined a budget shortfall of £240 million which had been covered up by “pulling forward” income from future accounting periods.
The report, part of which was read aloud to the court, said: “Pulling forward this income and falsifying documents to minimise audit risk […] generates a significant amount of work for our teams.”
Soni said that “falsifying documents” referred to the practice of pulling forward income from future accounting periods. Soni said commercial directors were under pressure to pull forward more income in order to continue covering up holes in accounts.
“Any document relating to pull-forward would have to be a false document,” Soni told the court. “It would not be a genuine transaction.”
He said that in at least one instance, income from suppliers due to be invoiced over a five-year period had been pulled forward into the current budget in order to make existing accounts appear more healthy.
“There was one or more case when it was clear that the income had been taken from the supplier for a contract that was pulled forward at least five years, so the income that should have been recognised over five years was recognised over one year,” Soni said.
The report also described accounting practices that were used “to avoid the attention of external audit,” and cited “material audit risks” in Tesco accounts.
“Pulling forward income goes against relevant accounting standards and the Groceries Supply Code of Practice,” the report said.
Former Tesco UK managing director Christopher Bush, former UK finance director Carl Rogberg, and former food commercial director John Scouler are all charged with fraud by false accounting and of fraud by abuse of position.
The trio were formally charged by the Senior Fraud Office last year. Lawyers acting for the trio have already pleaded not guilty.
The trial continues.